Maine lawmakers are working on a bill that would forgive up to $40,000 in student loan debt for eligible first-time home buyers.
Democratic Senate Speaker Troy Jackson revealed details of the Maine SmartBuy Program in a public hearing on February 22. He said the program will solve the state’s labor shortage by attracting young workers who seek student debt relief.
“We rely on young people to fill labor shortages, maintain our heritage industries and lead our state into the future,” Jackson said. “Through this program, we can make it easier for young people to create a meaningful and fulfilling life here.”
Keep reading to learn more about student loan forgiveness in Maine, as well as what you can do to manage your debt if you don’t qualify. One strategy is to refinance a private student loan at a lower interest rate. You can compare student loan refinance rates on Credible for free without affecting your credit score.
STUDY DISCOVERS THE 5 BEST UNDERGRADUATE DEGREES THAT CAN CARRY
Maine Smart Buy offers student debt relief for first-time home buyers
Last June, Maine Governor Janet Mills (D) signed a bill directing the Maine State Housing Authority (MaineHousing) and the Finance Authority of Maine (FAME) to develop a program that promotes homeownership by reducing student loan debt. After meeting several times during the third quarter of 2021, the agencies recently unveiled details of the program.
maine smart buy is modeled on similar programs in Illinois and Maryland. To meet the eligibility criteria for student loan forgiveness under this application, you must:
- Purchase a mortgage through the MaineHousing First Home Loan program. This home ownership program has an income limit of up to $131,100 and a maximum purchase price of $695,000, depending on your household size and the county you are moving to. You will also need a minimum credit score of 640 and a debt-to-income ratio (DTI) of 45% or less to qualify.
- Have an existing student loan balance of at least $5,000. Homebuyers who are approved for the Maine Smart Buy program will receive an unsecured promissory note that will be used to pay off their student loan balance. The promissory note will be equal to the amount of student loan debt you have at the time of closing, up to $40,000.
- Maintain the house as a principal residence. You will need to live in the home for at least five years to qualify for the full debt forgiveness amount. The debt is forgiven at a rate of 20% per annum – but if you sell the house before the expiry of the five-year period, you will only be responsible for paying the remaining balance of the promissory note.
The Maine Smart Buy program is still pending approval from the Maine Legislature, which sits until April. If approved, the measure would be funded by a $10 million allocation from the state’s general fund and will run through the next fiscal year, which ends September 30, 2023.
“Legislators have an opportunity to attract and retain young people by supporting the program to increase home ownership and alleviate student debt,” Senator Jackson said.
If you don’t qualify for this student loan forgiveness program, you may be considering other debt repayment strategies, such as refinancing. You can learn more about student loan refinancing by visiting Credible.
WHAT YOU NEED TO KNOW BEFORE MAKING A DEPOSIT ON A HOME
What to do if you don’t qualify for student loan forgiveness
Although the Maine Smart Buy program may one day provide student loan relief to some borrowers, it would only benefit a small fraction of the millions of Americans with student loans. Here are some alternative student loan repayment options to consider:
Learn more about each strategy in the sections below.
Federal student loan borrowers may be able to limit their monthly payments to between 10% and 20% of their disposable income under one of four income-contingent reimbursement (IDR) plans:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Pay As You Earn Reimbursement Plan (PAYE Plan)
- Income Based Reimbursement Plan (IBR Plan)
- Income Contingent Repayment Plan (ICR Plan)
The amount of your monthly student loan payment will depend on your income and family size, among other factors. After making payments on your loans for 20 or 25 years, the remaining balance of your student debt will be paid off. You can sign up for an IDR plan by logging into your account at the Federal Student Aid (FSA) website.
STATE OF THE UNION: BIDEN PUSHES FOR INVESTMENT IN ‘AMERICA’S BEST KEPT SECRET’
Federal Student Loan Forgiveness Programs
The Department of Education offers several student debt forgiveness programs to federal borrowers who meet certain eligibility criteria. These include, but are not limited to, Public Service Loan Forgiveness (PSLF), closed school exits, borrower defense against repayment discharges and total disability discharges and permanent (TPD).
YOU COULD GET A LOWER TAX REFUND IF YOU RECEIVED 2021 CHILD TAX CREDIT PAYMENTS
Student Loan Refinance
Student loan refinancing involves taking out a new private loan to pay off your current student debt on more favorable terms. It may be possible to lower your monthly payments, pay off debt faster, and save money over time by refinancing your student loans at a lower interest rate.
Keep in mind that refinancing your federally held debt into a private student loan would make you ineligible for certain protections such as IDR plans, COVID-19 administrative forbearance, and federal student loan forgiveness. But if you don’t plan to use these programs – or if you already have private student debt – then it may be worth refinancing at a lower rate.
You can view current student loan refinance rates from private lenders in the table below. Then you can use Credible’s student loan refinance calculator to estimate your potential savings and determine if this option is right for your financial situation.
7 OF THE BEST GRADUATE STUDENT LOANS
You have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.